October 30th Midweek Silver Market Update

Gold and silver have remained in the same spot value neighborhood through the first three days of this last week of October. The Fed’s policy-making body, the FOMC, held its monthly meeting this week and it was greeted with its usual attention and speculation. Apart from the FOMC’s meeting, investors had plenty of US and European economic data to chew on.

Chinese short-term interest rates are reported as continuing their rise, though monetary officials in the Asian country have not taken any action as of yet. If the Chinese tighten their monetary policy in response to rapidly rising interest rates, this could spell bad news for precious metals. The reason tightened monetary policies in China may end up hurting precious metals is because tightened monetary policies will work to decrease overall consumer demand from China. Because China is such a huge consumer of precious metals, any decline in their want for gold and silver will almost certainly hurt spot values.

FOMC Meeting

As is the case whenever the FOMC meets, investors were wholeheartedly focused on everything and anything that this meeting had to offer. Unfortunately for them however, this FOMC meeting was one of the duller ones we have witnessed recently. As was expected, the FOMC decided that they would push forward with their bond-buying policy, known as Quantitative Easing. QE, which sees the Fed purchase over $80 billion in assets each month, helps keep the US economy running by pumping in massive quantities of cash. With the US economy’s strength as uncertain as it presently is, there were few people expecting to hear of an alteration to QE in the wake of this meeting.

Instead of waiting for any changes to happen to monetary policy, investors were paying attention to the FOMC meeting in hopes of uncovering clues in regards to when the Fed may actually taper QE. Because Ben Bernanke, Fed Chairman, was not scheduled to address the media, investors were hard-pressed to find out anything the FOMC talked about during their meeting. However, a statement released by the Fed after the FOMC’s meeting concluded ended up being a slightly bearish factor for precious metals on the day. The Fed’s statement alluded to the fact that while the US economy is not strong enough to merit the tapering of QE, it is in a much better position now than it was less than half of a year ago.

This small bearish factor prevented gold and silver from realizing substantial gains today, though the retention of QE will continue to work as a long-term underlying bullish factor for both gold and silver.

Now, investors are left to speculate when they think the Fed will make a move in regards to altering monetary policy. Some feel as though we will have to wait until 2014′s first quarter, though others are under the impression that QE will not even come close to being altered before 2014 is halfway through. At this point, only time will tell what will happen to QE, but that does not mean we will stop speculating.

Posted in Market News

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